Analysts monitoring the sector suggest that Indian software exporters are poised to secure a significant portion of the anticipated $160-billion worth of IT deals set for renewal in the first quarter of 2023. Indian IT services companies are expected to compete for substantial portions of multi-year deals ranging from $100-500 million. This trend is driven by global corporations seeking to streamline technology spending, consolidate vendors, and take advantage of more favorable pricing amid challenging macroeconomic conditions.
Ray Wang, founder of Silicon Valley-based Constellation Research, estimates that the value of these new deals could represent nearly a fifth of the global IT services business, valued at $800 billion. Wang anticipates a resurgence of large deals in the first quarter of the fiscal year 2024, emphasizing that deal consolidation may extend beyond specific sectors like banking or retail.
The majority of these deals are expected to originate from American corporations, with some contributions from Europe and the Asia-Pacific region. Economic challenges in the US and Europe, including high inflation and recessionary trends, are compelling software buyers to consolidate spending, with a focus on financial services and consumer goods companies.
Large outsourcing deals have traditionally been a key aspect of the Indian IT landscape. In the post-pandemic era, clients are now more receptive to deals that were postponed for over two years, according to software exporters. Clients who previously extended existing deals with service providers are now actively seeking new service providers as the pandemic recedes.
HCL’s CFO, Prateek Aggarwal, notes a shift in client behavior, stating that customers are now seeking savings to support digital or growth initiatives. C Vijayakumar, CEO of HCL, cites ISG data, predicting a vendor consolidation opportunity exceeding $122 billion over the next 2.5 years. Tech Mahindra and Cognizant also report strong prospects in their large deal pipelines, focusing on growth areas like 5G, customer experience management, and digital transformation.
In response to queries about the segments driving large deals, Cognizant emphasizes the role of digital transformation in fueling industry growth and anticipates ongoing vendor consolidation to address demands for cost efficiencies and automation.
